Armchair Millionaire: Driving Down the Cost of Car Insurance

Question of the week:My car insurance premium has just gone up (again!), even though I have a perfect driving record. What can I do to get these auto insurance bills under control? --Kim T.

Dear Kim,

You're certainly not alone. According to the Insurance Information Institute, the cost of auto insurance premiums is expected to rise by about nine percent this year, which breaks out to about an additional $60 per vehicle.

And as evidenced by recent comments from members of the Armchair Millionaire community, others are feeling the auto insurance premium pinch. This comment was typical:

"I have a perfect driving record (not a single at-fault accident or moving violation), and yet I pay a ridiculous premium. Just because I am young and male and live in NJ (the worst possible combination in the US), I am penalized to the fullest. Just horrible..." --Alexander K.

Reducing your coverage and increasing your deductible are obvious moves, but there are many other common sense steps you can take to ensure that your premiums don't spiral out of control. My checklist provides just a few.

The Armchair Millionaire Checklist for Keeping a Lid on Car Insurance Costs

Shop around. Prices do vary greatly from one company to another, so it pays to comparison shop. Keep in mind that insurance companies may sell their policies in one of three ways: through their own agents, through independent agents who offer insurance from several different companies, and directly to customers over the phone or Internet. It pays to get quote from each type. Also, check with your state's division of insurance--many offer free price comparison guides through their Web sites.
Get every discount you can. Depending on what your insurance company offers, you may be eligible for a number of different discounts, including:
- Safe driver discount: If you have not had an accident or moving violation for a set period of time, or if you have recently taken a defensive driving class.
- Multiple car discount: If you are insuring more than one car with the same company.
- Car and homeowners: If you buy both auto and homeowners insurance from the same company.
- Discount for safety and anti-theft devices: For cars with specific safety devices (such as anti-lock breaks), or theft deterrent systems.
- Low mileage discount: If you drive the car fewer than a specified number of miles each year, typically 7,500.
- Other discounts may be available for long-time customers, students with good grades, college students away from home, and drivers over the age of 50 or 55. Be sure to ask.
Check out the car before you buy. The cost of your car model, how much it costs to repair, its safety track record and its attractiveness to car thieves all affect your premium. Before you buy your next car, compare the insurance losses for different models you may be considering. This information is available from the Insurance Institute for Highway Safety on its Web site at www.hwysafety.org.
Explore group policies. Some employers and associations (such as alumni and professional associations) offer group auto insurance policies at a discount to what you would otherwise pay.

THE BOTTOM LINE: If you drive, common sense (not to mention your state law) demands that you have car insurance. But that doesn't mean that you have to be a victim of ever-rising premium costs. With a little hunting around, you can find the best possible coverage for the lowest possible rate.